And those lost earnings, more than BofA is likely to report for the entire year, are now contributing to a capital hole at the bank.

This is the paragraph that condenses the absurdity of the situation:

Chief Executive Officer Brian T. Moynihan boosted asset sales at the second-biggest U.S. bank from $20 billion in 2010 [to $33 billion in 2011] to avoid issuing stock that would dilute current shareholders. He may end up doing that anyway: With fewer unwanted assets left to sell, Moynihan is now more reliant on earnings to generate capital. Selling shares or even crucial businesses can't be ruled out if new mortgage losses wipe out profit.

Faced with two less than ideal choices in 2011 (sell assets or raise capital), Moynihan chose the former to avoid the latter.

Perversely, he now finds himself in a situation where those asset sales may force him to do the very thing they were meant to prevent.